EXPLAINED: How investment firm PSP Bolton works and what is its relationship with Bolton Council?

FLICKING through Bolton Council’s annual audit report, carried out by accountants KPMG, one name pops up 58 times — PSP.

The acronym stands for Public Sector PLC and refers to an arrangement Bolton Council — and nine other authorities across the country — have in place with private investment firms.

Bolton’s version is called PSP Bolton LLP and the company works to maximise the council’s return on its land and property assets, by making savings and generating new income.

But the audit report has raised some issues with the arrangement, which is used to help the authority sell land and assets and get building projects up and running.

The partnership has been used for some of the key development projects in the town centre and across the borough – including the Travelodge hotel, the planned offices next to the £48 million Bolton Interchange project, and the controversial student accommodation development on Cheadle Square.

KPMG has raised a number of accounting problems in its report.

One such issue centred on the fact that cash assets totalling £8.4 million — which belonged to PSP Bolton LLP — were transferred to The Williams Pears Group, the parent company of PSP Facilitating Ltd.

The accountants state that the main issue with this is that, while the funds were moved to “secure a higher rate of return”, it was done without the prior agreement of the council and that should not have happened.

The auditors recommended that the cash was immediately returned and that the same situation should never arise again.

The council says it is working to resolve the issues raised.

A spokesman for the council acknowledged the error, adding: “We are aware of some minor issues raised by the auditor’s report on PSP. We have taken action to ensure that no further money transfers from PSP will take place without the specific prior approval of the council.

“We have discussed the actions we have taken with our auditors, they were satisfied with these and they have raised no further issues with us.”

Council leader Cllr Cliff Morris added that this was one of a few a “minor issues” that resulted from the difference in working practices between the public and private sector.

He said: “It’s like any new organisation, they do things differently than the local authority has done previously, so we are finding ways to join up and work together.”

Council chiefs estimate that since its inception in 2011, the partnership has helped to bring in £1.5 million from assets that would have otherwise not been sold.

Councillors on all political sides are in agreement that the arrangement works well as a method of making money from council assets at a time when the cash-strapped authority cannot commit the time or money into organising such sales.

How does the partnership work?

PSP describes itself as a “unique entity” bringing together the public sector with private sector funding, skills or resources.

The group works with different councils to set up individual companies — like PSP Bolton LLP — to help a range of property projects to be delivered.

In a given case, the PSP acquires an option to purchase a council asset, such as a building or a piece of land, for just £1 for a period of time.

The PSP and the authority agree a base value for the asset as well as a ‘profit share’ percentage.

The PSP does any work needed to maximise how much money can be gained from the sale and uses its experience or contact-base to make the sale happen.

When the sale happens, the council collects its base value amount — plus its part of the profit share — with PSP pocketing the rest.

Bolton PSP LLP

The council’s partnership deal was set up in December 2011 and is one of 10 of these types of arrangements in the country.

There is a members’ board set-up, which includes representatives from PSP but also includes council leader Cliff Morris, deputy leader Linda Thomas and Conservative group leader David Greenhalgh.

No decisions can be made on what projects can take place without the agreement of the board.

Cllr Morris said: “The arrangement makes it easier to get developments off the ground because as with many things, once you get the private sector involved, land moves better.

“So far with PSP dealing with these matters, they have made £1.5 million for the council in terms of pieces of land they have sold.”

Fellow board member Cllr Greenhalgh agrees that it is a “very positive arrangement”.

He said: “It is all about getting revenue streams for the council by getting rid of land and property that the authority owns and PSP can get it fit for purpose and ready for sale — these are things that the council currently can’t afford to do.

“So they sell it on and any additional profit is shared between the council and PSP”

He added: “They have contacts that the council never would and they are able to promote and market these properties or this land and can put money into it as well.”

What impact has it had so far?

PSP Bolton has been behind a number of projects in and around the town and as Cllr Morris points out, has already helped the authority to bring in a substantial amount of cash that it can pump into funding council services and one off projects.

One of these projects was to help the council to purchase the Travelodge in River Street — which now brings in between £250,000 and £300,000 each year in revenue, meaning the cash can be used by the council to fund everyday services like caring for vulnerable people.

The company is also involved with the new £6.5 million office development project being built on the junction of Newport Street and Great Moor Street and a number of other schemes around Bolton.

More controversially, PSP Bolton is involved with the intended development of the area around Cheadle Square in the town centre, which is the proposed spot for a new University of Bolton campus.

The designs printed in The Bolton News earlier this year were widely criticised and it is understood that a new vision for the area is being put together.

One deal done by the council was in 2013, when the council transferred its 2,600 ground rent assets into the hands of PSP Bolton for £14.25 million.

This means that the ground rent people previously paid to the council now goes to PSP Bolton.

The group says that the money received will be re-invested in “new revenue creating assets for the council” creating a “higher recurring revenue stream for the authority”.

Transparency

UKIP Councillor Paul Richardson, who represents Little Lever and Darcy Lever will ask a question at tomorrow’s full council meeting, regarding a perceived “lack of transparency” in the PSP arrangement.

He said he believes the partnership is “basically a good idea” but has issues with how much information is being provided.

He said: “I think because it is a bit arms length from the council no one seems to know what is going on and there doesn’t seem to be a lot of paperwork.

“We don’t know how often meetings take place. There does seem to be a lack of transparency and that is something I will be bringing up.

He added: “If they have made £1.5 million from it I would have thought the council would be shouting that from the rooftops, but we haven’t heard much.”

This is also an issue acknowledged by Cllr Greenhalgh, who as well as being a board member is also the chair of the council’s audit committee, which scrutinised the KPMG report.

He said: “When the issues were raised by KPMG, I was concerned and I have made it very clear to PSP that transparency is something that needs to be addressed.

“They have assured me that they are coming up with a new, more transparent system of reporting.

“KPMG have also had assurances from the council’s finance department and they are satisfied with that.

“Some simple meetings had not taken place and one thing they have now told me is that there will be a meeting between the council’s head of audit and KPMG to fully iron out any issues.”